Navigating changes to car VED rates

Since the start of April, the registered keepers of all cars have been impacted by new Vehicle Excise Duty (VED) changes, which see prices rise in line with RPI inflation.

The following summary includes VED prices based on a standard 12 month payment; other payment options may see higher prices.

Full information is available on the Government website, and a printable version of their guide is also available.

Tax bands for cars registered on or after April 1st 2017

New car buyers pay VED when the vehicle is first registered to cover a car’s first 12 months. After that, a different VED tax becomes payable each year. Please note that an exception to the information below is that there is a higher rate for diesel cars that do not meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide emissions is payable.

Year 1 for new cars - the first year of VED is included in a car’s on-the-road (OTR) price based on carbon dioxide emissions. It ranges from £0 for zero-emission cars to £2,605 for models that emit 255g/km or more.

Subsequent VED rates - the standard annual flat rate of road tax for the 2023/2024 tax year is £180 (up from £165 in the 2022/2023 financial year). There’s a £10 annual discount for alternatively fuelled vehicles, including mild-hybrid, hybrid, plug-in hybrid, bioethanol or LPG, so their owners pay £170 a year.

For cars with a list price of £40,000 or more, an additional £390 tax is applied for five years from the second time the car is taxed – usually at the end of the first year. Electric cars don’t pay VED currently, even if the new list price is above £40,000.

Tax bands for cars registered between March 1st 2001 – March 31st 2017

Cars registered between March 1st 2001, and March 31st 2017, are taxed based on one of thirteen bands according to their CO2 emissions and fuel type. The lower the emissions, the lower the vehicle tax. Cars that produce 0-100 g/km of CO2 pay £0 in VED costs; however, anything above that level pays a rising VED rate based upon emissions up to an annual charge of £695 for a petrol/diesel car that emits anything above 255g/km.

Owners of alternatively fuelled vehicles, including mild-hybrid, hybrid, plug-in hybrid, bioethanol or LPG, benefit from an annual £10 discount on the banded rates.

Tax bands for cars registered before March 1st 2001

The system is straightforward; cars are divided into two categories based on engine size – not over 1549cc (£200 pa) and over 1549cc (£325 pa).

VED Exemptions

Exemptions include;

• Historic vehicles built more than 40 years before January 1st of the current year
• Vehicles used by a disabled person
• Disabled passenger vehicles
• Mobility scooters, powered wheelchairs and invalid carriages

Looking ahead

The figures above are for the 2023/2024 tax year, and these can be expected to rise with inflation.

Some significant changes will come into place from April 1st 2025;

• EVs will lose their current VED exemption and will pay the standard annual rate (currently £180 pa) from the second year of registration onwards. The change will apply to existing EVs as well as brand-new ones. New EVs will also pay the VED supplement for cars with a list price of £40,000
• Alternatively fuelled vehicles will lose the £10 annual discount they currently enjoy.
• Zero- and low-emission vehicles registered between March 1st 2001, and March 30th 2017, currently in tax band A, will move to band B (currently £20 per year).
  

Chris Rowthorn, Director of Motor Sales Operations